The government announced starting Saturday the national loan limit will fall. Currently homeowners are able to borrower up to $729,750 before having to apply for a “jumbo loan”. After Saturday the maximum loan amount will be $625,500.
Chief economist at the Mortgage Bankers Association (MBA) Jay Brinkmann suggests borrowers looking at loans from the Federal Housing Agency (FHA) will be most impacted by such a change due to the fact that for many of them FHA loans are the only loans they qualify for. The FHA permits down payments as low as 3.5%.
The new loan limit is not expected to affect too many borrowers in the grand scheme of things. A study released by the Federal Reserve last week found that only 1.3% of purchase or refinance loans backed by Fannie Mae and Freddie Mac would have been adversely affected by lower loan limits had they been in place last year.